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SAN FRANCISCO — In the bright and early hours of Monday, Elon Musk sent a surprising message to the government. new document.
In it, the richest man in the world revealed his possible intentions to Twitter. owns 9.2 percent stakeHe underlined how drastically his position has changed from a week ago.
According to the document submitted to the Securities and Exchange Commission, Mr. Musk can buy more shares of Twitter and increase his ownership of the company if he wishes. The document stated that he can freely express his views on Twitter on social media or other channels. And he reserved the right to “change his plans at any time as he sees fit”.
It was a promise—or perhaps a threat. Either way, the filing summed up the precarious state Twitter is currently in. Musk, 50, Twitter’s largest shareholder and one of its most high-profile users, could have used the social media platform against him and even bought enough shares. take over the company.
“Twitter has always experienced more than its fair share of dysfunction,” said Jason Goldman, who was on Twitter’s founding team and served on its board of directors in the past. “But at least we weren’t actively being trolled by potential board members using the product we created.”
The filing comes after a week of high-stakes drama between the billionaire and the company. Last Monday, Twitter announced that Mr. Musk has now amassed more than $3 billion in stock in the company. Invited a day later Twitter’s 11-member board of directors and has agreed not to own or acquire more than 14.9 percent of the company. Then on Sunday, Twitter suddenly said: all those bets were off and that Mr. Musk won’t be a director.
It’s unclear exactly what happened between Mr. Musk, who has more than 81 million followers on Twitter, and the company’s executives and board members. But it leaves Twitter, which has survived its founding internal conflicts, board revolts, and outside stakeholder anger, with an activist investor unlike any other.
Mr. Musk, who also leads electric car maker Tesla and rocket company SpaceX, is known for being unpredictable and outspoken; He often uses Twitter to criticize, humiliate and troll others. By no longer joining the board, he freed himself from corporate governance rules that would require him to act in the best interests of the company and its shareholders.
Mr. Musk leaned on that freedom after his decision was communicated to the company Saturday morning. He announced on Twitter that he was in “goblin mode” and suggested changes, such as removing the “w” from the company’s name, making it more vulgar, and opening its San Francisco headquarters to accommodate the homeless. He later deleted some posts.
“This is not typical activism or, frankly, anything like the activism we’ve seen before,” said Ele Klein, co-chairman of the global Shareholder Activism Group at law firm Schulte Roth & Zabel. “Elon Musk doesn’t do things people have seen before.”
Patrick Gadson, co-head of Shareholder Activism at another law firm, Vinson & Elkins, said he sympathizes with Twitter. I would never want any director or any director I represent to deal with this situation.”
Mr Musk did not respond to requests for comment. He didn’t directly address the situation with Twitter’s board, but liked a tweet that suggested the company wanted to curb his freedom of expression rights.
Parag Agrawal, CEO of Twitter, touched on how Mr. Musk should act as a “trustee of the company”. a post Sunday. Twitter, which posted a biography of Mr Musk that is still visible late Sunday as a board member, declined to comment on Monday.
Mr. Musk has long shown serious disregard for corporate governance rules. He faced securities fraud charges in 2018 after falsely tweeting that he had funds to take Tesla private. Mr Musk later agreed to pay a fee. $20 million fine Go to the SEC and leave the Tesla presidency for three years.
It also agreed to allow Tesla to review its public statements about the company. But in 2019, the SEC asked a judge to arrest him for humiliation. violate the terms of the settlement By continuing to accidentally tweet about Tesla.
Employees feared and worried about Mr. Musk’s quirks, according to a half-dozen current and former workers who were not authorized to speak publicly on Twitter Monday. After the billionaire suggested over the weekend that Twitter turn his headquarters into a homeless shelter because “no one’s coming anyway”, employees questioned how Mr. Musk would know, given that he hadn’t visited the building in a while. They also pointed out who Mr. Musk is. net worth Pegged at more than $270 billion, it could easily help San Francisco’s homeless.
Others said they were upset by Mr. Musk’s tweets criticizing the company’s product and business model, that Twitter didn’t appreciate the time it took to update its services over the years, and thought he had no knowledge of the product roadmap. According to people viewing internal memos on Twitter, some employees said they were relieved to read that Mr. Musk would not be joining the board.
With it still apparent that Mr. Musk would join the board, Mr. Agrawal scheduled a question-and-answer session for Mr. Musk to address employee concerns. Someone with knowledge of the decision said the session was cancelled.
Mr Musk made Twitter engage with an activist investor for the second time in two years. investment firm in 2020 Elliott Management He owned a 4 percent stake and used his position to press for changes, including the removal of Jack Dorsey as CEO and more aggressive financial growth. Mr Dorsey resigned in November.
Elliott’s approach followed a typical formula for activist investors: buy a substantial stake in a company and then press for management and strategy changes to increase the stock price.
“Normally, an activist is very clear in their intentions,” said Rich Greenfield, analyst at venture capital investment fund LightShed Ventures. However, “We don’t know what Elon Musk’s real motivation is. Is this Elon having fun? Is this Elon trying to influence change? Is this Elon trying to push the stock higher?”
Analysts said Twitter was particularly sensitive to activists because its founders had not structured the company’s stock to give them more control. By maintaining voting power over the shares, the founders of Google and Facebook exercised great control over the direction of their companies.
Natasha Lamb, managing partner of Arjuna Capital, an activist investment firm with Twitter shares, said Mr. Musk took a more relaxed approach than other activist investors.
“Musk uses Twitter to publicize his ideas, but it’s not a core activity,” he said. “It seems like something he does for fun.”
What was fun for Mr. Musk may be less fun for Twitter. He said relief was short-lived among Twitter employees that he was no longer joining the board, when current and former employees realized he was no longer bound by an agreement not to buy any more shares or take over the company.
Mr Musk said he could continue to play with Twitter, current and former employees notice. Some added that they were afraid of what might happen next.
Lauren Hirsch contributing reporting.
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